The Australian Bureau of Statistics (ABS) Survey of R&D in the business sector is conducted in accordance with standard guidelines promulgated by the Organisation for Economic Co-operation and Development (OECD).

The survey is a complete enumeration of businesses identified by the ABS as likely R&D performers. Businesses mainly engaged in Agriculture, Forestry and Fishing (i.e. Division A of the Australian and New Zealand Standard Industrial Classification (ANZSIC)) are excluded partly because of collection difficulties and partly because such businesses are believed to have very low R&D activity (agricultural R&D activity is generally carried out by specialised research institutes not included in Division A).

DATA QUALITY

When interpreting the results in this publication it is important to take into account factors that may affect the reliability of estimates. These factors are described in the Non-sampling error section in the Technical Note.

Data presented in this publication may subsequently be revised. See the Revisions section of the Technical Note for further detail.

INQUIRIES

For further information about these and related statistics, contact Kirsty Rothenbury on Perth (08) 9360 5382.

SUMMARY COMMENTARY

CHAPTER 1: BUSINESS R&D

Resources Devoted to R&D

Business expenditure on R&D (BERD) in Australia in 2003-04 was estimated to be $7,220m at current prices, 10% higher than that recorded in 2002-03. This is the highest level recorded and is the fourth successive year of increase following the declines from 1995-96 to 1998-99 and the levelling off between 1998-99 and 1999-2000.

The change in BERD between 2002-03 and 2003-04 resulted from:

3,536 businesses performing R&D in both years, incurring $6,088m of R&D expenditure in 2002-03 and $6,295m in 2003-04, an increase of 3%. Of these continuing R&D performers, 44.4% recorded increases in expenditure of 10% or more, while 35.0% recorded decreases of 10% or more.

743 businesses which recorded $484m of R&D expenditure in 2002-03 and did not report R&D activity in 2003-04.

1,580 businesses who did not report R&D activity in 2002-03, but recorded $925m of R&D expenditure in 2003-04.

Human resources devoted to R&D in 2003-04 totalled 38,093 person years, 7% higher than in 2002-03.

Resources Devoted to R&D

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

Expenditure on R&D

At current prices

$m

4 235

4 221

4 095

4 137

4 983

r6 192

r6 571

7 220

Chain volume measures(a)

$m

5 276

5 158

4 896

4 776

5 442

r6 508

r6 754

7 220

Human resources devoted to R&D

PYE

26 412

24 769

25 109

26 507

28 391

r32 209

r35 567

38 093

r revised

(a) The reference year for chain volume measures is 2003-04. See paragraph 20 of the Explanatory Notes.

In volume terms, with the effect of changes in prices and wages and salaries removed, R&D expenditure increased by 6.9% from 2002-03 to 2003-04.

EXPENDITURE ON R&D

BERD as a percentage of GDP

Australia's BERD as a percentage of Gross Domestic Product (GDP) increased to 0.89% in 2003-04, subsequent to a levelling off in 2002-03.

BERD AS A PERCENTAGE OF GDP (a)

The table below shows Australia's BERD/GDP ratio as compared to all OECD countries for which comparable data is available.

BERD/GDP RATIOS OF OECD COUNTRIES(a)

2000-01

2001-02

2002-03

2003-04

%

%

%

%

Sweden

na

3.31

na

2.95

Finland

2.41

2.42

2.41

2.46

Japan

2.12

2.26

2.32

2.36

Korea

1.77

1.97

1.90

2.01

United States of America

2.04

2.00

1.87

1.79

Denmark

na

1.65

1.75

na

Germany

1.75

1.75

1.75

1.73

Belgium

1.48

1.60

1.63

1.71

Iceland

1.55

1.80

1.77

1.67

France

1.36

1.41

1.43

1.36

United Kingdom

1.21

1.24

1.26

1.24

Canada

1.15

1.27

1.09

1.03

Norway

na

0.96

0.96

1.00

Netherlands

1.11

1.10

1.02

0.99

Australia

0.74

r0.87

r0.87

0.89

Ireland

0.82

0.78

0.77

0.80

Czech Republic

0.74

0.74

0.75

0.77

Spain

0.50

0.50

0.56

0.60

Italy

0.53

0.55

0.56

0.55

New Zealand

na

0.42

na

0.47

Slovak Republic

0.43

0.43

0.37

0.32

Hungary

0.35

0.38

0.36

0.35

Portugal

0.22

0.27

0.30

na

Turkey

0.21

0.24

0.19

na

Poland

0.24

0.23

0.12

0.15

na not available

r revised

(a) See paragraph 2 of the Explanatory Notes.

Expenditure on R&D

The Manufacturing industry was the largest contributor (46%) to total BERD. The Property and business services, Mining and Finance and insurance industries were the next largest contributors to BERD at 23%, 11% and 9% respectively. Commentary focuses on the six largest industry divisions, which together contribute 96% of BERD.

Industry Comparison

The Mining and Manufacturing industries recorded expenditure increases of 28% and 13% respectively. Within Manufacturing, the largest percentage increases (of 47% each) were in the Textile, clothing, footwear and leather and Other transport equipment.

Expenditure on R&D increased by 20% in Property and business services, within which, the Scientific research industry group had the largest expenditure increase (28%).

The largest component of BERD was Other current expenditure (49%). Labour costs and Capital expenditure were 44% and 7% respectively.

Mining reported the lowest level of labour costs as a proportion of BERD at 12%. Property and business services and Wholesale trade both reported the highest proportion of labour costs at 58%.

At 82%, Mining had the highest level of other current expenditure as a proportion of BERD. Wholesale trade and Property and business services were amongst the lowest proportions reported, at 37% and 36% respectively.

Source of Funds

The business sector itself was the main source of R&D funding, with $6,348m (88%) from Own funds and $223m (3%) from Other businesses. The Commonwealth government was the source of $268m (4%) while $284m (4%) was from Overseas organisations.

Finance and insurance provided the majority of its R&D, while Property and business services main funding sources were Own funds (74%), Other businesses (9%) and Commonwealth government (8%).

Expenditure by Location

New South Wales and Victorian locations recorded the highest levels of R&D expenditure, at $2,716m (38%) and $2,073m (29%) respectively.

When R&D expenditure by location is expressed as a percentage of Gross State Product (GSP), the states with the highest ratios are South Australia (1.07%), Victoria (1.00%) and New South Wales (0.96%).

Expenditure on R&D, by location, GSP ratios

NSW

Vic.

Qld

SA

WA

Tas.

NT

ACT

Expenditure on R&D

Total(a)

$m

2716.5

2072.5

837.1

576.8

756.5

74.8

46.9

60.9

As a proportion of GSP(b)

%

0.96

1.00

0.59

1.07

0.85

0.52

0.49

0.37

(a) Australian External Territories are excluded.

(b) See paragraph 3 of the Explanatory Notes.

Mining industry expenditure on R&D was highest in Western Australia (37% or $286m) and Queensland (26% or $205m). Manufacturing reported its highest expenditure on R&D in Victorian locations with (38% or $1,253m) followed by New South Wales locations with (31% or $1,037m).

Expenditure by Size of Business

Businesses which employed 1,000 or more people accounted for $2,550m (35%) of total BERD. The Finance and insurance industry reported 93% of its expenditure in this employment size group, whereas only 11% of Property and business services expenditure was in this employment size group.

Businesses which employed less than 10 people accounted for $700m (10%) of total BERD. This employment size group was dominated by Property and business services ($312m), Mining ($148m) and Manufacturing ($125m).

Socio-Economic Objectives (SEO)

Business directed 90% of R&D expenditure into Economic development ($6,352m). Manufacturing was the SEO subdivision with the highest expenditure at $2,929m, followed by Information and communication services at $1,125m.

Research Fields

Engineering and technology and Information, computing and communication sciences were the Research Fields, Courses and Disciplines (RFCD) divisions of highest R&D expenditure at 54% and 26% respectively. Within these divisions, the fields of largest expenditure were Computer software (11%), Information systems (10%) and Automotive engineering (10%).

Human Resources devoted to R&D

Manufacturing and Property and business services contributed the highest level of human resources devoted to R&D, at 49% and 30% of total effort respectively.

Industry Comparison

In 2003-04 Mining and Manufacturing both recorded increases in human resources devoted to R&D from 2002-03 of 50% and 5% respectively. Property and business services and Finance and insurance also showed increases of 18% and 13% respectively. Wholesale trade recorded a decrease of 11%.

Human Resources by Size of Business

Businesses which employed 1,000 or more people accounted for 29% of the total human resources devoted to R&D in person years of effort. Whereas, businesses which employed less than 10 employees contributed only 10%.

Type of Employee

Researchers comprised 58% of the total human resources devoted to R&D, followed by Technicians and Other supporting staff with 28% and 14% respectively. In the Mining industry, Researchers accounted for 49% and Technicians 36%.

Within Manufacturing, the proportion of human resources devoted to R&D contributed by Researchers ranged from highs of 64% in Photographic and scientific equipment and 62% in Electronic equipment to a low of 14% in Other transport equipment.

Socio-Economic Objectives

Economic development recorded 33,668 person years of effort on R&D, being 88% of total human resources devoted to R&D. Within Economic development the SEO groups with the highest proportion of total human resources devoted to R&D were Manufacturing (44%) and Information and communication services (20%).

Research Fields

The Engineering and technology and Information, computing and communication sciences RFCD divisions recorded the highest proportion of total R&D effort, contributing 49% and 33% respectively. The RFCD disciplines with the highest proportions of total R&D effort were Computer software (18%), Automotive engineering (10%) and Information systems (9%).

Expected R&D Expenditure

Business expectation of expenditure on R&D for 2004-05 was $7,281m, which is an anticipated growth of 1% in expenditure from 2003-04.

CHAPTER 2: BIOTECHNOLOGY RELATED R&D

Introduction

The 2003-04 Business R&D survey collected additional information specific to biotechnology related R&D. Businesses that performed and/or paid others to perform biotechnology related R&D (extramural) on their behalf, were asked additional questions. Extramural R&D is out of scope of BERD, hence the extramural portion of biotechnology related R&D expenditure reported in this chapter is not a component of BERD.

Exclusion of ANZSIC Division A from the Business R&D survey may impact these figures.

Businesses which both performed and paid another organisation to perform biotechnology related R&D

78

191 275

Total

304

377 815

There was $270.8m (3.8% of BERD) of biotechnology related R&D expenditure, which was performed by 226 businesses. There were 155 businesses which paid $107.0m to others to perform biotechnology related R&D. Property and business services reported the highest number of biotechnology active businesses and the highest level of expenditure on both biotechnology related R&D performed by the business ($187.1m) and paid to another ($81.2m).

Expenditure on Biotechnology related R&D, by industry

Manufacturing

Wholesale Trade

Property and Business Services

Other Industries n.e.c.

Total

Businesses that

Performed biotechnology related R&D

no.

60

13

138

16

227

Paid another to perform biotechnology related R&D

no.

38

11

101

5

155

Expenditure on Biotechnology related R&D

Performed by this business

For own purposes

$'000

np

np

141 544

8 063

223 371

For another

$'000

np

np

45 546

59

47 463

Total

$'000

72 378

3 244

187 090

8 122

270 834

Paid to another organisation to perform who were

Located within Australia

$'000

np

np

53 962

586

76 198

Located overseas

$'000

np

np

27 204

-

30 783

Total

$'000

20 479

4 750

81 166

586

106 981

Total

$'000

92 857

7 994

268 256

8 708

377 815

- nil or rounded to zero (including null cells)

np not available for publication but included in totals where applicable, unless otherwise indicated

Biotechnology active R&D performers

Of the 304 biotechnology businesses, 252 performed R&D of some type spending $534.4m (7% of total BERD). These R&D performers were predominantly within Property and business services (59%), Manufacturing (27%) and Wholesale trade (7%).

(a) Only includes R&D performers who had expenditure on biotechnology related R&D. The R&D was performed by themself and/or another.

Bio-industry sector

Most businesses classified their biotechnology related R&D to Human health, which represented $262.7m or 70% of total biotechnology related R&D expenditure. Agricultural biotechnology had the next highest expenditure of $43.4m or 11% of total biotechnology related R&D expenditure. See paragraph 19 of the Explanatory Notes for more detail on the bio-industry sector classification.

There were 145 businesses which paid one or more Australian organisations to perform biotechnology related R&D. Of these:

66% paid a University or other higher education institution;

13% paid CSIRO;

30% paid another government or private non-profit research institute;

27% paid a CRO; and

15% paid another business.

Overseas organisations

There were 36 businesses which paid overseas organisations to perform biotechnology related R&D. The locations most frequently reported were the USA, England and Canada.

Overseas country outsourced to, Frequency (a)

See paragraph 18 of the Explanatory Notes for more detail on the country classification.

Reasons for outsourcing

Across all employment size groups, the most common reason cited for outsourcing biotechnology related R&D was a Lack of technical skill/expertise. For businesses which employed 0-19 and 20-99 persons, the second most common reason for outsourcing was Cost effectiveness. However, businesses which employed 100 or more persons reported the second most common reason as Not core business.

Factors adversely affecting biotechnology

For businesses which employed 0-19 persons the most severe adverse effects to both the advancement of biotechnology related R&D and biotechnology product commercialisation were Access to capital and Access to grants.

Businesses which employed 20-99 persons reported Australian/foreign regulations as the next most severe adverse effect after Access to capital, for both the advancement of biotechnology related R&D and biotechnology product commercialisation.

Access to grants and Public acceptance and ethical considerations were the most severe adverse affects to the advancement of biotechnology related R&D, for businesses which employed 100 or more persons. However, for biotechnology product commercialisation, Australian/foreign regulations and Public acceptance and ethical considerations were the two factors considered to have the most severe adverse effect.